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The Retirement Power Hour
The Retirement Power Hour
What Are Tariffs, and Will They Affect Me?
Are tariffs about to hit your wallet and your investment portfolio? In this episode of Retirement Power Hour, Joe Allaria, CFP®, breaks down exactly what tariffs are, how they work, and most importantly—what they mean for your retirement savings and day-to-day expenses.
From the latest moves by the U.S., China, Canada, and Mexico to expert opinions from PIMCO, Goldman Sachs, JP Morgan, and more, we’re giving you a balanced look at what’s happening and what it could mean for your financial future.
Check out our article on this topic: How Tariffs Could Impact Your Investments, Retirement, and Everyday Expenses
If you enjoyed this episode, make sure to check out our podcast 2025 Stock Market Predictions https://youtu.be/S39zw8sMUqI
Resources Mentioned in this Episode:
-Trump suspends tariffs on small packages from China
-Trump agrees to pause tariffs on Canada and Mexico but not on China
-China's tit-for-tat tariffs on US take effect
-What the U.S. Tariffs Mean for Investors
-How Will Tariffs Affect Your Investments?
-How investors looking for good returns can navigate Trump tariffs
-Tariffs rattle stock markets, but what’s the long-term impact?
-Tariffs on the rise: Implications for your portfolio
-Trump tariffs will cost U.S. households $830 a year, study says
-Trump's tariffs on Canada, Mexico, and China would cost the typical US household over $1,200 a year
-What are tariffs and why is Trump using them?
If you enjoyed this episode, make sure to check out our podcast 2025 Stock Market Predictions
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Disclaimer:
All material discussed on this podcast is for educational purposes only and should not be construed as individual tax, legal, or investment advice. Investing involves risk of loss, and investors should be prepared to bear potential losses. Past performance may not be indicative of future results. Joe Allaria & Jay Waters are Investment Adviser Representatives of CarsonAllaria Wealth Management, Ltd., a Registered Investment Advisory firm. The information discussed on this podcast may be derived from third parties that are believed to be reliable, but CarsonAllaria Wealth Management does not control or guarantee the accuracy or timeliness of such information and disclaims all liability for damages resulting from such sources. Any references to third parties are provided as a convenience and do not constitute an endorsement.
Learn more about CarsonAllaria Wealt
Tariffs and Your Money: Impact on Your Portfolio and Household Budget
Joe Allaria:So, how much impact will tariffs have on your portfolio and your wallet? Some experts estimate the average cost of goods per household will go up $800 to $1,200 per year in the United States. And many investment professionals, however, are estimating that tariffs would have a modest effect in the stock market. One company estimating a 5% decline in the stock market as a result of tariffs. So should you make any changes in your portfolio? Well, we say if you're already allocated properly according to your risk tolerance and your situation, we say no. Our take is to stay the course, stay diversified, and keep a long-term view.
Joe Allaria:Retirement Power Hour Episode 37: What Investors Should Know About Tariffs
Joe Allaria:Hello, everyone. Welcome to the retirement power hour. This is episode 37, and today we are talking about tariffs. Obviously, tariffs have been in the news a lot lately. You've heard announcements of President Trump's proposed tariffs on Mexico, Canada, and China. Some have already happened as of the recording of this video. A lot is happening, and this video may get outdated fairly quickly, but we wanted to bring you some information about tariffs and whether or not they should cause you to be making any changes in your portfolio. So we're going to jump into all of that today. Don't forget to go to retirement powerhour podcast.com. If you have questions about this, leave them on the website or click work with me and we can schedule a call and talk more about this and its impact for you specifically.
Joe Allaria:What Is a Tariff? Simple Definition for Investors
Joe Allaria:But first, let's jump in. What is a tariff? I'll read you the definition of a tariff. A tariff is a tax charged on goods imported from other countries. The companies that bring the foreign goods into the country pay that tax. And typically, these tariffs are expressed as a percentage of the total value of the goods that are imported. So you'll hear a 10% tax, a 25% tax, we'll talk about that. And a lot of times the companies that pay the tax end up passing that added cost on to the end consumer. So something that maybe they imported previously for $10. If there's a 10% tariff on those products now, now they're paying $11. They pass that additional cost on to the consumer. And that is causing a lot of the anxiety for consumers and investors around tariffs, around how's it going to impact my wallet? And also, is it going to affect the earnings of the companies that I'm invested in? Because now they have to pay more money to bring in and import goods into the United States.
Joe Allaria:Current Tariff Landscape: China, Canada, and Mexico (As of Recording)
Joe Allaria:So let's talk about where we are with tariffs, what has happened as of the recording of this video, and what has not happened yet. Let's first start with China. A 10% tariff was imposed on China, and I'll just read this to you. Took effect on February 4th. President Trump then said shipments of less than $800 would be exempt from these tariffs. Then China retaliated with its own tariffs that took effect on February 10th, 2025. This included a 15% tariff on U.S. coal, on liquid liquefied natural gas products, and a 10% tariff on crude oil, agricultural machinery, and large engine cars. China has also repeatedly said that they uh are opposed to a trade war with the United States. So you've got that happening with China.
Joe Allaria:Canada Tariff Updates: Proposed Rates, Delays, and Border Measures
Joe Allaria:Then we move on to Canada and Mexico for that matter. But Canada, a proposed tariff of 25% on all goods imported from Canada, was due to begin on February 4th, but has since been delayed. President Trump has come out again recently and said that these are going to go in place March 4th of 2025. So we'll see. There was a 30-day delay. Canada also announced and then paused its retaliatory tariffs of 25% on about $107 billion worth in US dollars of U.S. imports. So we're in a holding pattern as far as Canada goes. And Prime Minister Trudeau has said that Canada was implementing a $1.3 billion border plan to try and uh to add new choppers and technology and personnel to the U.S.-Canada border to try and stop the flow of fentanyl into the United States. So that is still playing out.
Joe Allaria:Mexico Tariff Status: Proposed Tariffs and Security Commitments
Joe Allaria:And similarly, you have a very uh similar situation with Mexico, where we had a 25% President Trump uh proposed a 25% tariff on uh goods imported from Mexico, which has also been delayed a month. Uh the Mexican president Claudia Scheinbaum has agreed to send 10,000 members of the National Guard to the U.S.-Mexico border once again to try and prevent the trafficking of drugs, in particular fentanyl. So that is also in a holding pattern. We will see how these things continue to play out.
Joe Allaria:Should Investors Change Portfolios Because of Tariffs?
Joe Allaria:But the real question again comes back to you're a consumer. How is this going to affect your wallet? You're an investor. How is this going to affect your portfolio? And really, should you be making any changes to try and lessen that impact? Well, I wanted to give you some perspective on what some large institutions, some different economists are saying. And there are a lot of opinions about the effects of tariffs. Should you listen to any of them? Probably not. Want to know why? Go back and watch our last episode on the 2025 market predictions, where we talked about what actually happened the previous year with 2024's predictions and how wrong they were. Or you can watch the same topic video from the year before that, or the same video we did the year before that. And you'll see that absolutely no one knows what the future holds. And we believe very strongly that successful investing is about implementing the fundamentals of investing, not trying to out-guess the market and guess the outcome of these unknown future events.
Joe Allaria:Expert Perspectives on Tariffs: PIMCO, Northern Trust, Goldman Sachs
Joe Allaria:But with that, let's give you some context on what different financial institutions and individuals are saying. And the first I want to talk about is from Pimco. Pimco has a podcast that you can go listen to called Accrued Interest Podcast. It's on Spotify and Apple. And one thing I actually liked about that podcast, a couple of things I took from it. First is that there is a knee-jerk reaction to tariffs where everyone thinks that tariffs are automatically gonna be inflationary. But there are a lot of nuances to how tariffs work. And a point that was brought up in the podcast by the guest on the show is that tariffs are usually used for one of two reasons: either a bargaining chip or a battering ram. And uh the market is trying right now to figure out what President Trump or how President Trump is trying to use these tariffs and what the strategy really is. And they are betting that tariffs are being used as a bargaining chip, a way to improve the trade trade position that we have with our big trade partners. That would be one way. Now, if you're using tariffs as a battering ram, then that's a different story. Now you're you're out to punish another country or an economy or one of your enemies, and the market right now is leaning the opposite way. But of course, President Trump is not going to say, hey, I'm just using this as a negotiating tactic, because as soon as you let everyone know that, the effectiveness of that strategy basically dissolves. So this has caused a lot of uncertainty in the markets, and uncertainty itself is another factor that you have to price in, both with equity markets and interest rates and the Fed, and whether or not the Fed will cut rates or raise rates, uncertainty does play a factor into that. So, what is the takeaway in all this? Once again, it is quit guessing. It's not possible to guess, and you know, or we can guess, but to accurately predict the outcome of these future events. It's just not possible. There's too many unknown factors that we don't know about.
Joe Allaria:Market Outlooks: Negotiating Tactic or Lasting Policy?
Joe Allaria:Moving on to another opinion in terms of what would tariffs do to the stock market. We look at an article from Northern Trust, who thinks that tariffs, again, will be more temporary and they're more in the bargaining chip side of the fence. And let me just read you their comments directly from their article. Uh, we see the tariffs as a negotiating tactic rather than a long-term strategy, similar to the approach that was taken during the first Trump administration. We think the objective is to leverage these tariffs to achieve more favorable trade terms rather than maintain them indefinitely. So that's what we just talked about. Additionally, the upcoming Canadian elections create uncertainty about the long-term stability of any agreements reached, making it less likely that tariffs will be a permanent fixture. So there you have another party that thinks that these tariffs, again, will be short-term in nature as opposed to sustained for a long period of time.
Joe Allaria:Stock Market Impact Estimates: S&P 500 Earnings and Tariffs
Joe Allaria:Next, we have Goldman Sachs, and they've given their opinion on how tariffs might affect the market. And they say for the stock market, for every five percentage point increase in the US tariff rate, it's estimated to reduce the SP 500 uh earnings per share by roughly one to two percent. When you take all of that and calculate all that together, their models at least show the SP 500 could decline 5% in the near term if the US has sustained tariffs. In other words, they they stay in effect for a longer period of time. If the the tariffs end up being short term, then the net effect on the market would be even less than that 5% drawdown. So once again, you think, okay, this provides some context, at least on what some people are thinking. Is there going to be an impact or could there be? Sure. Now you're getting an idea of what uh of some of these players are thinking.
Joe Allaria:Stay the Course: Why Knee-Jerk Portfolio Moves Can Hurt
Joe Allaria:Next, uh, we have an article from money.usnews.com. And I'm gonna read a quote from Cliff Ambrose, who is a federal retirement consultant and founder of Apex Wealth, another wealth management company, says that while tariffs can influence market conditions, it's generally not a good idea to make drastic decisions to your investment strategy based on short-term policy shifts. And he could goes on to say tweaking your strategy too often can result in uh poor timing of decisions or increased fees, even from frequent trading. So we've got another person saying, don't try to out and guess this, don't jump in and jump out. It's more than likely going to lead to a negative long-term result.
Joe Allaria:Behavioral Finance Insights: The Cost of Emotional Reactions
Joe Allaria:Moving on, we've got a couple more opinions. So, another opinion, this one comes from a financial post article. How will tariffs impact the market? What should investors do? Behavioral finance firm, Oxford Risk Research and Analysis shows that knee-jerk emotional reactions to market swings cost investors an average of 3%, 3% per year in returns. And the company predicts that this year could be the perfect storm with some of the uncertainty that we're experiencing, could be the perfect storm for investors to do just that, have a knee-jerk emotional reaction and miss out on returns in the market. So we don't want that to happen for you. And 3% per year is a huge difference in the long run. Might not sound big, but it is a huge difference.
Joe Allaria:Big-Firm Guidance: Invesco and J.P. Morgan on Staying Diversified
Joe Allaria:Uh, Invesco, just continuing on, another financial institution, says that for the vast majority of investors, that means stay calm, diversified, and carry on. And I love that. Stay calm, diversified, and carry on. That was their summary of everything that's going on where tariffs are concerned. And a great takeaway, I think, as well. Lastly, I wanted to include JP Morgan. Now, again, some of these Goldman Sachs, JP Morgan, if you watched our last podcast, you might say, Joe, why are you telling us what these companies said you just shared on the last podcast about how their predictions in the market were so wrong? Uh, yeah, like I said, should you listen to any of these? Should you base anything off of what people say is going to happen? Probably not. I'm just trying to give you some context uh around what people are saying here. But we always believe the best strategy is to create your plan, your retirement plan, your financial plan. Create an allocation that is based around your situation and your risk tolerance, and then maintain that, stick to that despite what you're hearing in the environment. So, anyway, I'm gonna give you JP Morgan's uh thoughts here. We expect U.S. equities to continue to outperform the rest of the world in 2025, despite tariffs, despite you know their impact, uh, as they go on to say.
Joe Allaria:Household Costs: How Tariffs May Affect Everyday Expenses
Joe Allaria:Now, that's all how tariffs could affect the stock market. But a lot of people just want to know how are tariffs going to affect my wallet? You know, how much I pay at the grocery store, how much I pay for my vehicle. And so there could be an impact there too. And I said in the opener that there have been estimates where the cost per household per year uh show that yeah, the cost could go up $800 to $1,200 per year. And that's coming from Axios, who estimated $830, increased cost per household per year. And then the Peterson Institute for International Economics estimated that tariffs would add $1,200 per year in increased cost uh to every household in the U.S. on average. So we'll put links to these studies in our show notes where you can go and read more about that. But again, these are estimates. You have to be ready for many different kinds of risks. When you talk about investing and when you are planning your own budget, you don't want to leave yourself no room. Ideally, if you are not retired, you're putting money away, you're saving money for retirement, you have an emergency fund, a solid foundation. You always want to be in that strong position because if tariffs do happen and there is a short-term increase in cost, you want to have time to be able to adjust. So leave yourself a margin of safety. Don't spend more than you make, don't rack up a bunch of high interest credit card debt and not have any room to kind of recover from something that may throw you off. Again, in the context, will affect some more than others, but that's at least something for you to go off of when you talk about how much these could affect your normal expenses.
Joe Allaria:Should You Worry? Building a Resilient, Risk-Aligned Portfolio
Joe Allaria:So, should you worry about tariffs? Well, worrying as a strategy by itself has a 0% effectiveness rate. It will get you nowhere, it will certainly not help you progress and move forward. Now, should you be diligent? Yes, as always. Should you build a portfolio or have someone build a portfolio for you that can address many different types of risks, both known and unknown? Yes, as always. Should you be making any changes right now, like we talked about, if your portfolio has already been set up in such a way, then no, just because of tariffs alone, we don't think that should cause investors to make changes automatically to their portfolio because of what we're hearing about tariffs. Again, the key is to invest according to your risk tolerance and your retirement timeline.
Joe Allaria:Risk Tolerance Check: Two Questions to Set Your Allocation
Joe Allaria:So, how do you invest toward your situation or your risk tolerance? Well, you have to ask yourself a couple of questions. First, what is the maximum decline that I could emotionally withstand in my portfolio? And second, when am I going to need to use the money in my portfolio for living expenses, for retirement? How far away is that point? How much time do I have? And the answer to both of these questions should give you a really good idea of how you should ultimately be invested. Do you need a lot of money in the short term? Well, you should probably be more conservative with that money. Can you not take more than a 15% decline in your portfolio? Well, you better go very conservative if that's you. So knowing the answer to both of these questions will tell you exactly how you need to invest according to your own situation.
Joe Allaria:Get Personal Advice: Schedule a Call About Tariffs and Your Plan
Joe Allaria:So, once again, as always, go to retirement powerhourpodcast.com and click work with me, where you can schedule a call, and we can talk about these things and talk about your situation. If you haven't put a financial plan together or a retirement plan together, and you don't know how much money you're going to need in the short term, in the midterm, or what does short term even mean? What does midterm even mean? You've never seen an actual plan and you don't know if your allocation matches up with that plan, schedule a call and we'll take you through all of that with one of our advisors from our advisory team. It'll start with a very simple, open discussion to see if we can help you. Again, retirement powerhour podcast.com. And you can also leave us a review. We'd very much appreciate if you can take a minute or two to do that if this material was helpful for you. With that, we appreciate you tuning in to the Retirement Power Hour Podcast, where we help listeners invest wiser and retire better. Take care.
Speaker:Thank you for listening to the Retirement Power Hour Podcast. All material discussed on this podcast is for educational purposes only and should not be construed as individual tax, legal, or investment advice. Investing involves risk of loss, and investors should be prepared to bear potential losses. Past performance may not be indicative of future results. Joe Joe Allaria is an investment advisor representative of Carson Allaria Wealth Management, a registered investment advisory firm. Information discussed on this podcast may be derived from third parties that are believed to be reliable, but Carson Allaria Wealth Management does not control or guarantee the accuracy or timeliness of such information and disclaims all liability for damages resulting from such sources. Any references to third parties are provided as a convenience and do not constitute an endorsement.
